Copenhagen agreement

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Delegates from 192 countries met in Copenhagen in late December
2009 to discuss ways to reduce global
carbon emissions, which are widely
acknowledge to contribute to global warming. The Conference was made
necessary because the existing global targets, as set out in the Kyoto
Protocol, are due to expire in 2012. While the Summit failed to reach a
full and binding agreement on carbon reduction, which would have required
developed countries to reduce their emissions by 2020 to between 25% and
45% of 1990 levels, delegates accepted a US backed compromise - the
Copenhagen Accord. This requires the
developed countries to pay £18.5 billion to the developing
countries by 2012, rising to £62 billion per year by 2020, to help them adjust to a
low-carbon future. In return, the expectation is that developing
countries will open themselves up to inspection and verification.
Developed countries have pledged to provide detailed plans for carbon
reduction to the United Nations (UN).

There was also a pledge to try to prevent global temperatures
rising by 2 degrees centigrade above preindustrial levels.

The Kyoto Treaty

The purpose of the
Kyoto Treaty, signed in Kyoto, Japan,
in 1997, was to make the major industrialised economies of the world
commit to reducing their greenhouse gas emissions in two phases. The first
phase ends in 2012, and the agreement states that signatories should
reduce emissions to levels less than those occurring in 1990 by that
date. The Treaty was signed by 156 countries and came into effect in
2004.

The target for the
first phase was for the EU as a single trading bloc to
cut emissions by 8%, with the UK independently agreeing to a 20%
reduction by 2010. Developing countries are not subject to the
agreement, though they have been encouraged to become more
‘environmentally conscious’. Many are concerned that, as a developing
economy, China is not subject to the limits agreed in Kyoto, yet it is
predicted that China will become one of the planets biggest polluters
over the next 10 years.

By 2003 the UK had reduced its greenhouse gases by
13% from its 1990 levels, and by 2006, emissions had fallen by 20%. (Source:
Defra.gov.uk).
However, other countries had not been so successful, with emissions
from Spain and Portugal up by 42% and 37% respectively. (Source: The
Times, December 2005).

Under the Kyoto rules, if countries exceed their
agreed limits in the first phase (2008-2012) they are penalised by
having to make up for the ‘overshoot’, plus a 30% further reduction, in
the second phase (from 2013.)

In global terms, growth in car usage and air travel
is likely to make it difficult to achieve any of the targets.
Unfortunately, the world’s biggest polluter, the US, pulled out of the
agreement in 2001, though Russia did eventually join in 2004.

Despite the first and second oil crisis, during which the price
of oil rose sharply, and the Kyoto Protocol, global carbon emissions have continued to
rise over the last 30 years.

Remedies

The

economic theory of pollution suggests that producers and consumers do
not take carbon and other chemical emissions into account when they
calculate their marginal private cost and benefit. This makes it
extremely difficult for markets to resolve the pollution problem.

Markets could work efficiently if those suffering from a specific
instance of pollution could identify the specific polluter, and could
sue them. In this case, the polluter will consider the fine, or legal
damages, a marginal private cost, and, to avoid further costs, will
reduce pollution. This would work with noise pollution from a
specific factory, because local residents could take the owners to
court. However, with carbon pollution, property rights over the
atmosphere cannot be established, and specific polluters cannot be
identified and sued directly. This means that there is no 'built-in'
incentive to be a non-polluter.

There are a number of remedies proposed
under the Kyoto Treaty, and by environmental economists. Remedies
can either
exploit the price mechanism's ability to
signal,
ration
and provide
incentives, or they involve legislation and compulsion.